Walmart trims fiscal year earnings guidance

At its annual investment community meeting, Walmart pared its fiscal 2019 earnings-per-share forecast and projected a slight EPS decline for fiscal 2020 due to the impact of the Flipkart acquisition.

Walmart said Tuesday that it expects fiscal 2019 EPS of $2.65 to $2.80 (GAAP), down from its previous guidance of $2.90 to $3.05. Adjusted EPS is now pegged at $4.65 to $4.80 versus the earlier outlook of $4.90 to $5.05.

The Bentonville, Ark.-based retail giant noted the update reflects share dilution of 25 cents from the $16 billion purchase of Flipkart, India’s largest e-commerce player. Closed in August, the deal marked Walmart’s biggest acquisition ever and made the company Flipkart’s largest shareholder, with a 77% stake. Fiscal 2019 GAAP EPS also includes a $1.51 negative impact from the sale of Walmart Brazil and a 50-cent impact from unrealized gains/losses in Walmart’s equity investment in JD.com.

Leading into the investor event, analysts projected Walmart’s 2019 adjusted EPS at $4.79 on average, with estimates ranging from a low of $4.62 to a high of $4.90, according to Thomson Reuters.

On the revenue side, Walmart reaffirmed its fiscal 2019 sales guidance of about 2% growth (constant currency). Comparable-store sales are forecast to rise approximately 3% year over year for Walmart U.S. and Sam’s Club, with e-commerce sales surging 40%. Revenue for Walmart International is expected to inch up 0.7% (constant currency).

Related:Walmart completes acquisition of India’s Flipkart

“We’re adapting and transforming with speed to better serve our existing customers and reach new ones,” said Walmart President and CEO Doug McMillon, who gave investors a review of Walmart’s performance for 2019 and what to expect in the next fiscal year. “We’re operating with discipline, balancing our short- and long-term opportunities. While we’re excited about what we’ve done so far, we aren’t satisfied. As we execute today and build for tomorrow, our associates and unique omnichannel assets position us for success.”

Though not providing figures, Walmart said it expects fiscal 2020 adjusted EPS to decline by low single digits year over year. However, excluding the impact of Flipkart, adjusted EPS stands to rise by low to mid-single digits, according to the company.

Analysts’ consensus forecast calls for 2020 adjusted EPS of $4.71, with estimates running from a low of $4.43 to a high of $4.84, Thomson Reuters reported.

Walmart projects total sales to grow at least 3% (constant currency) in fiscal 2020. This reflects a 100-basis-point negative impact from the deconsolidation of Walmart Brazil and planned tobacco sales reduction at Sam’s Club, the company said.

Related:Strong U.S. performance boosts Walmart in second quarter

Comp-store sales in 2020 are forecast to increase 2.5% to 3% at Walmart U.S. (excluding fuel) and 1% at Sam’s Club (excluding fuel). Backing out both fuel and tobacco sales, comp-sales growth at Sam’s is estimated at 3%. E-commerce sales are expected to grow 35% for the year.

At Walmart International, sales growth is projected at 5% for 2020, including a positive impact from Flipkart and a negative impact from the deconsolidation of Walmart Brazil, the company said.

As of mid-morning trading on Tuesday, Walmart shares were up $1.83 to $95.65.

“I feel great about Walmart’s position in this rapidly changing retail landscape. We are leveraging our scale, assets and financial strength in ways unique to Walmart to enhance and build competitive advantages,” commented Chief Financial Officer Brett Biggs, who gave investors a business and financial overview of Walmart and a preview of fiscal 2020. “We continue to operate with discipline, we’re strengthening our cost culture and we’re leveraging technology, data and analytics in new ways to be more productive. Our financial strength gives us the flexibility to deliver near-term results while making strategic decisions for the longer term.”

Walmart’s planned $11 billion in capital expenditures for fiscal 2020 will focus on store remodels and e-commerce expansion as well as investment in customer initiatives, technology and the supply chain.

The company said it expects to open fewer than 10 U.S. stores for the year but forecasts more than 300 new units internationally, mainly in Mexico and China.

In online grocery, Walmart is targeting about 3,100 curbside pickup and 1,600 delivery locations by the end of fiscal 2020.

Walmart had previously set a goal to bring online grocery delivery to 100 metropolitan areas — covering 40% of U.S. households — by the end of 2018 through its own services and third-party providers. As of late September, the company said it had online grocery delivery in over 50 markets and more than 2,000 grocery pickup locations.

The retailer projects that it will have 2,140 grocery pickup sites in 430 markets, covering 69% of U.S. households, by the close of its 2019 fiscal year at the end of January.